Software to be sold, leased, or otherwise marketed is software developed as a product for customers rather than primarily for a company's own internal operations.
Under US GAAP, that purpose matters because externally marketed software follows a different accounting model from Internal-Use Software.
Recognition pattern
Before Technological Feasibility is established, qualifying software-creation costs are generally treated as research and development expense.
After technological feasibility and before the product is available for general release, qualifying production costs may be capitalized. After release, capitalized costs are amortized under the applicable software guidance.
Why classification matters
Two companies can incur similar engineering payroll and cloud-development costs yet report different expense timing if one is building internal software and the other is building a software product for customers.
The economic question and the accounting classification are related but not identical.
Investor interpretation
Investors should examine the company's product model, capitalization threshold, release cadence, amortization policy, impairments, and whether cloud-delivered software arrangements fall within the same accounting scope.
Capitalization under the external-software model is not proof that demand exists or that the product will be profitable.
IFRS comparison
IFRS generally analyzes internally generated software under IAS 38's research/development framework rather than duplicating the US GAAP externally marketed software model.
Sources
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